Almost every conversation about retirement starts the same way. You might have read an article, been recommended a figure at a barbecue, or run your details through an online calculator to arrive at a magic number in your head. A million dollars. A million and a half. Whatever it is, you treat this figure as the finish line: hit the number, and you’re safe; miss it and you’re not.
It is a comforting way to think about a complicated subject. It’s also potentially the wrong way, because it causes two very different problems. Some people chase a figure they never actually needed, working years longer than required. Others assume the number is out of reach, give up on planning altogether, and leave real options on the table. Neither of these options is necessary.
Why a single number misleads
A lump sum on its own tells you almost nothing. What matters is the income that sum can produce, how long it needs to last, and what else is supporting it. Two people can retire with identical balances and have completely different levels of security, because retirement is not funded by a number sitting in an account. It is funded by a combination of sources working together.
For most Australians, those sources include superannuation, the age pension, and any investments or income held outside super. The age pension in particular changes the maths for a lot of people. It is not just a safety net for those with very little; part pensions extend well up the asset scale, and the interaction between your assets, your income, and your pension entitlement often matters more than the headline balance you have been fixated on.
What actually determines whether you are okay
Instead of starting with a target balance, we help you by asking the questions that will decide it:
- What does the life you want to live actually cost, year to year? This is key, and often it’s not the frightening figure people assume.
- How long does that income need to last, and what happens to spending across the different stages of retirement? Most people spend more in the early, active years and less later on.
- How much of your income will be reliable and ongoing, and how much will move with markets? The mix matters as much as the total.
- Where does the age pension fit, now or later, and how do your decisions affect your entitlement over time?
- What assets sit outside super, and how easily can they be turned into income when you need them?
Answer those, and the number stops being a mystery. It brings clarity to your retirement plans.
The regional reality: asset-rich, cash-poor
For a lot of the families we work with, the anxiety is not really about the size of the number. It is about liquidity. You might have significant wealth tied up in a farm, property, or a business, and still feel uncertain about retirement because none of it is in a form you can draw income from on a Tuesday.
That is a genuine planning issue, and it is one a single retirement figure completely misses. The land, the plant, the livestock are all valuable, but they are also productive, illiquid, and often bound up in succession arrangements that take years to work through. The question for you, then, is less “have I hit my number” and more “what combination of assets, super, and structure will actually give me an income I can rely on, without having to sell the thing my family depends on?” That is a far more useful conversation, and it looks different for every household.
A better question to bring to the table
So when someone comes to us and asks how much they need to retire, our honest answer is that it depends on questions they have not been asked yet. What do you want retirement to look like? What income does that take? What have you already got working toward it, and what are the gaps? Once those are on the table, we can build a plan that produces a number specific to you and, more importantly, a strategy to get there and draw on it sensibly.
A target figure borrowed from a calculator or a news headline was never built for your situation. A plan is. That is the difference between guessing and knowing.
Coming up: our retirement planning seminar
We are running a retirement planning seminar in early September, working through exactly these questions: how retirement is really funded, how the age pension fits, and how to think about the assets you already hold. If retirement is on your horizon and the “number” has been sitting in the back of your mind, this session is for you. Get in touch with the MBC Wealth team to register your interest or to have a conversation with Greg beforehand.
Frequently asked questions
Is there really no rule of thumb for how much I need to retire?
Rules of thumb exist, and they can be a useful starting point for a broad conversation, but they are averages built for no one in particular. Your costs, your health, your other assets, and your age pension position all move the answer, sometimes dramatically. Treat any general figure as a prompt to plan, not an answer.
Does having a farm or business mean I need more in super?
Not necessarily more, but often a different structure. The key issue is usually liquidity and how your retirement income is drawn without forcing the sale of a productive asset. That is a planning question worth working through well before you intend to stop, not in the year you do.
How does the age pension change the picture?
For many retirees, the age pension, full or part, forms a meaningful and reliable part of their income. Because entitlement depends on your assets and income, decisions you make in the lead-up to retirement can affect it. It is one of the reasons a whole-of-picture plan beats a single savings target.
General advice warning: The advice provided is general advice only. In preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product. MBC Wealth is an authorised representative of Count Financial Limited, AFSL 227232.
Greg Thornton is a Certified Financial Planner and SMSF Specialist Adviser at MBC Group Services, with nearly two decades of experience in financial planning. His career spans Westpac, Crest Financial Services and StatePlus, giving him a broad base of knowledge across banking, financial advice and industry super. Greg specialises in pre-retirement and retirement planning, working with clients of all ages and backgrounds to build a clear, realistic picture of their financial future, explained in plain language.
